By Drew Johnson

Tuesday, May 8th, 2012 @ 12:08 pm

Subaru parent Fuji Heavy Industries Ltd announced on Tuesday that it has scrapped plans to begin building cars in China from 2013. Although China will now play a smaller role in the automaker's sales plans, Fuji says the United States market will pick up some of that slack.

Subaru was planning to begin vehicle production in China next year, but the Japanese automaker failed to gain government approval for a new joint-venture with the country's Chery Automobile Co Ltd. Chinese law requires a joint-venture for any car maker planning to manufacture within the country.

Despite those dashed plans, Fuji says it will continue to pursue a partnership to allow for Chinese production of its Subaru cars.

"We haven't given up on local production in China," Fuji Heavy President and Chief Operating Officer Yasuyuki Yoshinaga told Reuters. "We'll keep waiting patiently for any progress."

As a result of the failed joint-venture, Subaru slashed its Chinese sales goal from 180,000 units to 100,000 units during the 2015/16 fiscal year. That reduction can be blamed on a 25 percent import tariff levied against imported vehicles, which makes it very difficult to sell in large volumes.

However, despite that setback in China, Fuji Heavy says it will boost production in the United States and Japan by a combined 45,000 units by mid-2014. The automaker didn't break down that capacity boost by country, but added that it plans to expand further in the North American market in the coming years.

Subaru now plans to sell 850,000 vehicles in the fiscal year ending March 2016, down from its earlier estimate of 900,000 units.